KEY POINTS:
Lombard Group shares plunged 29c to 50c today after the company announced a moratorium of payments by its finance company.
Lombard Group listed on the NZX in December 2005 and its chairman is former National government minister Sir Douglas Graham. The share price fall left the company with a market valuation, or capitalisation, of $11.7 million.
The company said today that its wholly owned subsidiary Lombard Finance and Investments Ltd has invited Perpetual Trustees to call a meeting of secured debenture holders to consider a moratorium on its obligations to investors.
Perpetual said it would make a statement later today. KordaMentha has been engaged to provide an overview of the moratorium but was unavailable to comment.
"It is clear from recent events that this is a systematic failure of an entire industry, and from our perspective a moratorium is now the only responsible course of action," Lombard Finance and Investments chief executive Michael Reeves said.
Mr Reeves said $111 million was owned to holders of secured debenture stock and $16 million to holders of subordinated notes and subordinated capital notes.
The company has loans with a book value of $143 million but does not know how much it will recover in the current market.
"I and rest of the board very much regret this has occurred and the anguish this will cause investors," Mr Reeves said.
"However, we believe the interests of investors are best served by a moratorium to enable an orderly realisation of its loan book."
Mr Reeves confirmed that there was no related party lending and that all mortgages were over property in New Zealand.
The moratorium is in respect of its payment obligations to holders of secured debenture stock, subordinated capital notes and subordinated notes.
The company hopes that during the moratorium it will be able to pay capital and interest when it is prudent to do so as funds permit.
"In recent months our borrowers have found it increasingly difficult to sell properties and equally difficult to refinance their mortgages and repay their loans to Lombard Finance.
"As a result Lombard Finance in turn is unlikely to be able to meet its obligations to investors as they fall due in late April or May," Mr Reeves said.
The company has suspended a prospectus it has in the market.
Lombard Group said it does not expect the moratorium to have an impact on the group's other businesses.
They include Maestro Commerce Ltd, Tasman Mortgage Group and United Home Loans. It bought United from Hanover.
- NZPA
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